Is Taiwan The New Destination For Indian Borrowers?

State-run Export-Import Bank of India Monday joined the expanding list of lenders such as South Korea’s KB Kookmin Bank to tap the rising investor wealth in Taiwan, leveraging the pricing edge the east-Asian island offers to overseas issuers of floating-rate debt.

The Mumbai-based bank became the first Indian lender to raise $400 million by selling “Formosa” bonds, which are sold in Taiwan in currencies other than the local Taiwanese currency. The floating-rate bonds will mature in five years.

“This is the first ever Formosa deal by an Indian Financial Institution,” said Shashank Joshi, head of global corporate banking at Bank of Tokyo-Mitsubishi UFJ. “Also, this was the first bond sale with five-year floating rate by an Indian issuer. There was an overwhelming investor response. The bond-sale will trigger more investor interest in this kind of deals, especially from Indian banks and financial institutions.”

The bonds have been priced after adding a 100-basis point spread over the three-month LIBOR (the London Interbank Offered Rate), which is now pegged at 1.31%. With a change in the three-month benchmark, the yield will keep changing.

Exim Bank has obtained a lower yield on investor demand, as the spread was initially pegged at 115 basis points.

The order book was more than double the actual size at $870 million, and included investors such as asset managers, retirement funds, and private banks. Investors across Asia, Europe and the local institutions from Taiwan bid for the issue.